Look Beyond Offshore: Understand the Software Development Options

Companies that are interested in outsourcing software development should explore all of the outsourcing models available to find the service that best fits their needs. Understanding the basic differences in options for outsourcing will help accelerate your decision-making process. Let’s quickly cover the basics of outsourcing and the different type of outsourcing options available.

The Basics of Outsourcing

In essence, outsourcing is when a company contracts a process or project to a partner outside of its team. It’s the opposite of insourcing, and is a great way to save time and money. Companies have to manage their processes to be profitable and there are only so many hours in a workday. Outsourcing software development allows a company to focus on its core competencies by freeing up talent to work on more important tasks. Outsourcing also saves money on software development projects that have too high of an upfront cost to do on your own, because it allows the company to utilize already built infrastructure and experts.

Onshore Outsourcing

When a company hires from the outside, but within the same country, they are outsourcing to an onshore company. Onshore outsourcing, otherwise known as domestic outsourcing, allows a company to gain the expertise of specialized developers while minimizing the risks associated with offshore outsourcing.

Onshore outsourcing may also occur as a reaction to a bad experience with offshore outsourcing. This process is called reshoring – bringing an offshored project back to its original country. This is often time the result of & wanting better control over the quality and cost of the development. Some factors that lead to the reshoring of offshored projects back to their original country are a spike in transportation costs, cultural conflicts, or technological breakthroughs that lead to more efficient processes in the originating country.

Offshore Outsourcing

When thinking about a specific subset of outsourcing, most are usually thinking about offshoring. Offshoring is a type of outsourcing where a company sends a project or process abroad from their headquarters. For example, a lot of companies from the United States offshore their IT departments to Asia, specifically India and China. The strategy behind offshoring is to save on overhead costs, materials, and labor.

However, companies that offshore software development take on some risk with the quality of the product. Challenges with language barriers and time zones make it difficult to coordinate quality communications. Flying CEOs and project managers across the world for quality checks is also costly and time consuming.

Nearshore Outsourcing

Nearshore outsourcing is the middle ground between offshore and onshore outsourcing, where software development is outsourced to a partner that shares a dimension of proximity – geographic, time zone, culture, language, or politics. In principle, nearshore outsourcing provides the same access to affordable experts and materials as offshore outsourcing with the added benefit of better quality control and communication – in the same local time zones!

For companies located in the United States, most nearshoring projects are sent to Latin America, specifically Mexico. For some States, it makes more sense to nearshore projects than to outsource to another U.S. company. For example, a company located in Texas interested in outsourcing their software development is closer to highly skilled software developers in Mexico than they would to more expensive developers in Silicon Valley, California or New York City, New York.